"Google is probably going to want to distinguish itself from the iPad as much as possible," David McQueen, principal analyst at the tech consultancy, Informa, told the BBC.

Asus already makes the Transformer Book which it describes as the "world's biggest tablet"

"Beyond running Android one way to do that is to offer a high-quality device with a smaller screen.

"Of course other firms have tried to do that. But apart from the Kindle Fire most have been significantly more expensive than $200 [£128]. If Google can hit that price point with more impressive features it should be able to grow the market for its mainstream Android system."

Amazon may be prepared for the challenge. Tech site Cnet has reported that an
updated Kindle Fire
could be announced next month.

Any new devices will also face competition from Microsoft later in the year when it releases its Windows 8-powered family of Surface tablets.